Hyde was the third son of Henry Hyde of Dinton, Wiltshire, a member of a family for some time established at Norbury, Cheshire. He entered Magdalen Hall, Oxford[?], in 1622 (having been rejected by Magdalen College), and graduated B.A. in 1626. Intended originally for holy orders, the death of two elder brothers made him his father's heir, and in 1625 he entered the Middle Temple to study law. His abilities were more conspicuous than his industry, and at the bar his time was devoted more to general reading and to the society of eminent scholars and writers than to the study of law treatises.

This time was not wasted. In later years Clarendon declared "next the immediate blessing and providence of God Almighty" that he "owed all the little he knew and the little good that was in him to the friendships and conversation ... of the most excellent men in their several kinds that lived in that age." These included Ben Jonson, Selden, Waller, Hales, and especially Lord Falkland; and from their influence and the wide reading in which he indulged, he doubtless drew the solid learning and literary talent which afterwards distinguished him.

In 1629 he married his first wife, Anne, daughter of Sir George Ayliffe, who died six months afterwards; and secondly, in 1634, Frances, daughter of Sir Thomas Aylesbury, Master of Requests. From this second marriage came a daughter, Anne. In 1633 he was called to the bar, and obtained quickly a good position and practice. His marriages had gained for him influential friends, and in December 1634 he was made keeper of the writs and rolls of the common pleas; while his able conduct of the petition of the London merchants against Portland earned Laud's approval.

During the Civil War, Hyde served in the King's council as Chancellor of the Exchequer, and was one of the more moderate figures in the royalist camp. By 1645 his moderation had alienated him from the King, and he was made guardian to the Prince of Wales, with whom he fled to Jersey in 1646.

Hyde was not closely involved with Charles II's attempts to regain the throne in 1649 to 1651. It was during this period that Hyde began to write his great history of the Civil War. Hyde rejoined the exiled king in the latter year, and soon became his chief advisor, and was appointed Charles's Lord Chancellor in 1658. On their return to Britain in 1660, he became even closer to the royal family through the marriage of his daughter, Anne, to the king's brother James, Duke of York, the heir-presumptive. Their two daughters, Mary II and Anne would each one day reign in her own right.

In 1660, Hyde was raised to the peerage as Lord Hyde of Hindon, and the next year was created Earl of Clarendon. As Lord Chancellor, Clarendon was the author of the "Clarendon Code[?]", designed to preserve the supremacy of the Church of England. However, he began to fall out of favor with the king, and the military setbacks of the Second Anglo-Dutch War of 1665 to 1667 led to his downfall. He was impeached by the House of Commons, and forced to flee to France in November, 1667.

He spent the rest of his life in exile, working on his History of the Rebellion and Civil Wars in England, his classic account of the English Civil War. He died in Rouen on December 9, 1674. Shortly after his death, his body was returned to England, and he is buried in Westminster Abbey.